APG4398: NEW COMMUNICATIONS MEDIA

ESSAY # 4: FINAL ESSAY

Using a specific new media example of your own choosing,

compare and contrast one aspect of one new media; how it has

shifted, what are its strengths, what has it replaced, complemented

or is new. Provide contextual framework describing and the

analysing how they function within society.

From CDs to MP3s: Piracy and

the Transformation of an Industry

- The impact of personal computers, the Internet and

new digital media formats on the music industry,

copyright laws and consumer behaviours.

By Karyn Scottney-Turbill

Monash University

Advances is digital technology have revolutionised the very way in which media is

distributed and consumed. Digital media innovations have immensely improved the

initial quality of audio and visual recordings, as well as subsequent reproductions

(Goel, Miesing, Chandra, 2010, p1p1), and have bought about revolution within the

music industry, as the debate over legal and illicit downloading rages on. Such new

technologies have rapidly altered consumer behaviours, and the industry has been

forced to redevelop existing business models, facing serious losses in the retail

sector.

As such advances in technology lead us to an “era of unprecedented knowledge,

cultural reproduction and dissemination, we are challenged to reconsider the

fundamentals of copyright law” (Fitzgerald, 2008, p2), and are left to analyse the

consequential effects of digital technology and new media. Developments in

information sciences in the 1980s, including the introduction of personal computers,

made digital technologies like the Internet a reality. The subsequent creation of the

MPEG-1 Audio Layer-3 (MP3) format, soon lead to the birth of Napster, the outbreak

of the phenomenon of peer-to-peer (P2P) file sharing, Internet pirating, iTunes, and

rendered the compact disc all but obsolete (MP3 Developments, 2011, p1-3), with

MP3s now the preferred medium. While some prospered from the transition, others

believe this technological revolution caused the near death of the music industry

(King, 2002, p1and Kravets, 2007, p1).

The music industry “attributes an erosion of sales after 1999 to the illegal copying

and sharing of digital files and has taken steps to tighten copyright laws and

prosecute violators” (Goel, Miesing, Chandra, 2010, p1), with the losses all but

crippling business. In 2009, the International Federation of Phonographic Industry

(IFPI) estimated a staggering 95% of downloaded music, within that year had been

downloaded illegally (BBC, 2009, p1 and Gloor, Rolston, 2010, p1), without payment

to the creators or industries producing it. Yet, others “attribute the downturn to a lack

of innovative products and futile efforts by the industry to retain a business model

made obsolete” (Goel, Miesing, Chandra, 2010, p1) by progressing technologies, as

this is merely a transitional stage of progress, and unavoidable. They believe that

such innovations are only capable of destroying business if the industry continues to

resist such advances, rather than embrace them (Leckenby, 2003, p25 and Goel,

Miesing, Chandra, 2010, p1). This cannot be said for Apple however, who has since

secured a strong hold over the industry. Their innovative and successful attempt to

secure the new media market was initiated by the introduction of the Apple iPod and

the simultaneous roll out of iTunes, their own digital music store in 2003 (Mumbi

Moody, 2010, p2).

Underlying the term new media, fundamentally is the digitisation of media and, such

new media technologies “come about based upon a ‘platform’ of traditional media

which have preceded them” (Leckenby, 2003, p25). This is dubbed “the

‘Transference Phase’ of media development” (Leckenby, 2003, p25) and digital radio

is a brilliant example of this, with the successful shift from analogue radio waves to

the increasingly popular channels available online and through digital media devices.

With the continual reign of digitisation, of the Internet and of new media

technologies, many sectors of the media and entertainment are being forced to

endure profound transformations within their industries.

Innovations in technology have always led to progressions in the music industry,

causing periods of transition to new formats, from existing methods of audio

engineering. The industry has come a long way since Thomas Edison’s phonograph

revolutionised the world in 1877 and from the introduction radio of in 1923 (Audio

Engineering Society, 1999, p4). This medium, originally invented for military

communications during the First World War, became the feature of the domestic

space from the 1920s (MP3 Developments, 2011, p1-3).

Before digital technology became a reality in the 1980s, innovations in analogue

technologies continued to transform music, with the invention of ‘long players’, or

LPs in 1947 (MP3 Developments, 2011, p1-3), and the introduction of the first pocket

transistor radios by Sony in 1954 (Audio Engineering Society, 1999, p15),

noteworthy as being the first portable, personal media devices. Other notable

advances were made by Phillips, who created “the first Compact Cassette tape

format, offer[ing] licenses to the world” (Audio Engineering Society, 1999, p15) in

1963, followed soon after by the introduction the Walkman, by rivals Sony, in 1981

(MP3 Developments, 2011, p1-3). That same year, Phillips came back, inventing the

Compact Disc, which saw the death of the audio cassette and later, the rise of the

‘discman’ (Audio Engineering Society, 1999, p15). However, the biggest threat and

challenge yet to traditional models of production, distribution and reception came

about from advances in information sciences during the 1980s.

The development of the 16-bit personal computer, rolled out by IBM in 1981, and

followed by Macintosh with their Apple Mac in 1984 (MP3 Developments, 2011, p1-

3), initiated the “digitisation of production [which soon] spread through all of the

major cultural industries” (Hesmondhalgh, 2007, p 242), paving the way for the

Internet and marking the gradual and progressive shift toward the Information Age.

Apart from the creation of the personal computer and Internet, one of the most

significant innovations altering the music industry, was the invention of the MP3

format in Germany in 1989 (MP3 Developments, 2011, p1-3). This new media

became widely available to consumers in 1998, when MP-3 players, devices to play

downloaded audio files (Audio Engineering Society, 1999, p15), hit markets

worldwide. MP3s have a lossless quality and the simple format and ease of

distribution means the digital medium became rapidly popular and simply the

preferred medium of audio consumption (Hesmondhalgh, 2007, p 245 and MP3

Developments, 2011, p1-3).

Then in 1999, in America, a nineteen-year-old college student’s development

“proceeded to redefine the Internet, the music industry and the way we all think

about intellectual property” (Tyson, 2000, p1), with the invention of his file sharing

software, Napster. Once boasting “eighty million registered users, the revolutionary

software” (King, 2002, p1), encompassed a search engine of MP3 files, derived from

other user’s computers, peer-to-peer (P2P) file sharing tools and Internet Relay Chat

(IRC) to locate and communicate with other Napster users (Tyson, 2000, p2). This

new concept of peer-to-peer file sharing meant users, when accessing music via

Napster were in actual fact downloading MP3s from another user’s machine.

Collectively, these users had access to thousands of music tracks, and the ability to

illegally and freely download them. This sent shockwaves through the music

industry, seriously rivaling their previously unchallenged powers of production and

especially distribution, and, in doing so, drastically reducing their profits. According to

Jeff Tyson (2000) this ‘decentralised approach’, means there was “no central server

maintaining the index of users, [and] no easy way to target and stop the use of the

program” (Tyson, 2000, p2), presenting an exceptional, unprecedented dilemma to

both the industry and the advocators of copyright law.

However, within the first year of its’ introduction, the Recording Industry Association

of America (RIAA), representing an alliance of record labels in the United States,

began judicial action against Napster. The RIAA, in their filings, argued Napster

“should be held liable for enabling millions of users to share music for free, depriving

artists and the publishers and producers of music of revenue they are entitled to

under copyright statutes” (CNN, 2000, p1). This was seen as the most fundamental

case “involving the application of copyright laws to Internet activities" (CNN, 2000,

p1) and was presented before a three-judge panel of the 9th U.S. Circuit Court of

Appeals. While the RIAA had the obliteration of Napster firmly in their sights, the

wheels of progress remained in motion, and in 2000, Internet provider AOL’s Justin

Frankel “released Gnutella, a new file-trading application, into the world” (King, 2002,

p1), which AOL subsequently co-opted. Yahoo and Microsoft followed suit, with their

own versions of file sharing software (King, 2002, p1), and an already agitated

industry was left to face the reality of the infiltration of peer-to-peer file sharing and

the seemingly unstoppable dominance of illegal downloading.

The RIAA was eventually successful and “accomplished its goal of serving Napster

with a copyright infringement lawsuit” (King, 2002, p1), but by this point Napster was

already a global phenomenon, and easily replicated. Seven years after litigations

began, Bertelsmann, one of Germany’s largest media conglomerates was forced to

pay “the National Music Publishers Association one hundred and thirty million dollars

to settle the Napster case’s final copyright claims” (Kravets, 2007, p1). Bertelsmann

was found to have financed Napster, “thereby allowing Napster to continue allowing

millions of users to pilfer music” (Kravets, 2007, p1), and was the final junction

served in the case against Napster, originally filed in 2000. During the trials, Napster

was forced to cease its operations as a free file sharing network and has since been

re-launched as a paid music provider. Yet the basic peer-to-peer model it initiated

was now unstoppable (Kravets, 2007, p1). In 2010, following the successes of

litigations against Napster “the company operating LimeWire file sharing service was

found liable for copyright infringement” (Gloor, Rolston, 2010, p6), in another

noteworthy case filed by the RIAA, four years prior, in 2006 (Gloor, Rolston, 2010,

p6).

Such digital technologies, deemed new media, were set to challenge copyright laws

of a number of nations, which in the case of the United Kingdom, had remained

unchallenged for three hundred years (Hough, 2011, p1). Copyright infringements

are taken very seriously by creative industries and judicial systems. The laws of

“copyright apply to works which are still within the period of copyright protection [and

the] duration of copyright varies according to the type of copyright material” (Music

Australia, 2008, p1). Copyright laws state that the “use of copyrighted material

without permission may constitute infringement” (Herreman, 2009, p9) invoking

cases of various liabilities against each defendant. Most consumers however, in their

‘format shifting’ of music… from personal collections onto MP3 players” (Walsh,

2006, p1) are unbeknown to the fact they are actively committing such offences.

In light of advancing digital technologies and the popularity of new media devices,

some governments have since reviewed Copyright laws, reforming them to discount

such behaviours. Such steps have been taken by the Australian government, who in

2006 announced that “transferring music from CDS onto iPods and other MP3

players [would] no longer be illegal” (Walsh, 2006, p1), with the federal cabinet’s

ruling defining a momentous change to Australia’s long standing copyright laws.

Member of Parliament, Philip Ruddock, in making the announcement, went on to

warn of the repercussions of the illegal downloading of copyrighted content. He

announced that police would have the authority to issue hefty fines and courts the

“powers to award larger damages payouts against internet pirates” (Walsh, 2006,

p1), demonstrating the combined work of the police, legislative forces and creative

industries, in their tireless attempts to wage a war on illegal downloading.

Many involved in such debates over the legality of copyright infringements, believe

Internet Service Providers (ISPs) should be monitoring illegal file sharing and

downloading, taking action against offenders, or if not, at the very least, reporting

them (Gloor, Rolston, 2010, p6). In 2010, the United Kingdom took such steps, with

the introduction of the Digital Economy Bill; a ‘three strikes’ system to be employed

by Internet Service Providers, notifying users of violations regarding the downloading

unlicensed materials. As the explanation suggests, such violators will be given three

written warnings, before disconnecting there services, temporary, or in the cases of

serious or repeat offenders, on a permanent basis (Gloor, Rolston, 2010, p7). Other

countries have since followed suit, with their own versions of such bills of culpability,

including the United States, with the introduction of the SOPA Act in 2011 (The

Shontell, 2011, p1).

The actions of the music industry in recent history have highlighted a clear

unwillingness to accept what they see to be the converse results of digital formatting.

Many have refused to adequately remodel existing business structures to suit the

current digital climate, also in denial of the pros of such new media technologies.

The exception has of course been Apple, who has not only embraced such new

technologies, but has used innovations in digital formatting to accelerate business

and profits, and, in doing so, surpassing their once dominant competition. According

to Bill Werde, editorial director at Billboard, such moves have secured Apple “80

percent, 70 percent market share in that digital space” (Mumbi Moody, 2010, p2),

attained through their online music store, iTunes. Regardless of Apple’s efficacious

re-modeling and on-going success in the digital market, other sectors of the industry

continue to resist the transition, with few attempts to produce a reasonable online

retail market model.

Tony Wadsworth (2009), chairman of BPI has worked tirelessly with governments in

their efforts to counter pirating, which is occurring in plague proportions. However, in

light of the undeniable benefits that also come with such new media innovations,

stated that such developments have “meant music is consumed in more places in

more ways than ever before” (The Independent, 2009, p1), which of course is

invaluable. Nevertheless, he reiterated the importance of artists and producers

getting paid what is due, to ensure fair use and to guarantee the future of the

industry (The Independent, 2009, p1).

The outrage of lost profits and issues of piracy have underpinned the slow

progression of the industry, to embrace new digital formats. The International

Federation of the Phonographic Industry (IFPI) “represents the recording industry

worldwide, with a membership comprising some 1400 record companies in 66

countries and affiliated industry” (IFPI, 2012, p1) and attributed the profit losses from

the retail sector, to a seven precent decline of the world music market in 2008.

According to the IFPI, even though digital sales were increasing, they failed to

parallel increasing losses from CD sales (IFPI, 2012, p1).

Many notable musicians have joined the debate, and English pop star, Lily Allen on

her MySpace blog claimed that “illegal file-sharing was making it "harder and harder

for new acts to emerge", (The Independent, 2009, p1). While there is some truth to

this, digital technologies and new forms of social media should not have their role in

discovering new talent discounted. The Internet and new media sites such as

YouTube and other popular social media networks have actually “been one of the

most powerful tools used by artists to share their content… introduce[ing] millions to

artists, musicians and personalities that would have never been discovered”

(Manarino, 2012, p1) without such services. Moreover, as Manarino (2012) rightfully

highlighted, “creators of every genre have discovered the ability to market and

publish themselves in a way where they [can] garner viral attention” (Manarino,

2012, p1), meaning such new, digital technologies, in having the ability to put the

control of the production of content in the hands of the consumer, have in fact been

crucial to the discovery and popularity of many new artists.

Downloading digital music has “seen the return to the singles-driven business of the

1950s” (Anderson, 2004, p10), with consumers now able to avoid the unwanted

content upon whole albums. Consumers now have the power to select what music

they want, when they want it. While most within the music industry were busily

concerning themselves with the detriments of the phenomenon of peer-to-peer file

sharing, waging a war against illegal downloading, Apple was getting on with

business, and, in 2003 it rolled out its online music store, iTunes. This new concept,

“with its’ simple interface, its’ simple concept — 99 cents per song” (Mumbi Moody,

2010, p2), along with the simultaneous introduction of the “revolutionary MP3 device,

the iPod (Mumbi Moody, 2010, p2),” were originally rolled out for Apple Macintosh

systems only. Thus, initially the success and any future profitability of this innovative

marketing concept were drastically underestimated.

Over the next eight years, Apple went on to sell “three hundred million iPods and ten

billion tracks via the iTunes Store, leapfrogging Wal-Mart and Best Buy as the

world's biggest music retailer” (Knopper, 2011, p1). This gave Apple the supreme

and unchallenged power to set the pricing and the standards of the industry’s

inevitable shift to online markets. In 2007, chairman and chief executive of Warner

Music Group when assessing the importance of iTunes to music fans due to its

dominance, commented that “while Apple’s stock went from eight billion dollars to

eighty billion dollars, [theirs] went in reverse” (Knopper, 2011, p1), highlighting the

need for others in the industry to find their own competitive business models, for the

digital age.

In recent years, in the face of profits lost from illegal downloading, artists and

industry professionals have made successful attempts to bolster profits derived from

other resources. According to statements made by Tony Wadsworth, chairman and

chief executive of EMI, in 2008, “live gigs, merchandising, advertising, digital

licensing, broadcast – had grown from £121.6m (11.4% of total revenues in 2007) to

£195m (18% of the total in 2008)” (The Independent, 2009, p1). He also stated that

“the future business model of this industry might not be based on transactional music

sales for much longer” (The Independent, 2009, p1), drawing attention to innovations

such as Guitar Hero, as an example of the emergence new profitable ventures. He

also mentioned popular rock band Radio Head’s success in their own marketing

attempts, selling their latest album online, for as little as the consumer was willing to

pay. According to Wadsworth, this move gave them not only a profitable share in

their music downloading, but also a newly found popularity from the subsequent

media attention (The Independent, 2009, p2).

Regardless of the debates about illegal file sharing, fears about the future of an

industry and uncertainties in pricing, it can be said, we are at the point in our creative

histories, where there is simply not enough shelf space, nor radio waves for the

content that has already been produced, or to suit the desires of every consumer

(Anderson, 2004, p4). Furthermore, considering the cost of stock purchasing,

leasing, overheads and staffing, “an average record store needs to sell two copies of

a CD per year to make it worth carrying” (Anderson, 2004, p2), when the reality,

according the RIAA is, less than ten percent of major label CDs become profitable

(BBC, 2009, p2). Whilst the directors of long standing, traditional music businesses

have resisted progress, refusing to benefit online consumption, the “market that lies

outside each retailer is getting bigger and bigger” (Anderson, 2004, p7). The CEO of

one digital jukebox company, stated that of the tens of thousands of songs available

on his site and others, there is a demand for each and every one of them (Anderson,

2004, p5), impossible for any physical outlet to stock. Therefore these ventures

remain unmatched by current fiscal models in retail.

Supporting this argument are the executives at “iTunes, Amazon and Netflix [who]

have discovered that the ‘misses’ usually make money too” (Anderson, 2004, p6),

stating that over history more mediocre songs have been produced, than hits. Their

ability to carry thousands and thousands of these titles, without the overheads of

physical retail outlets, swiftly adds up to be highly profitable. According to

Wadsworth, as fast as the hugely popular file sharing domain, Raphsody adds tracks

to its library, those songs find an audience” (Anderson, 2004, p6), leaving many

wondering why others within the industry continue to resist these new digital formats.

The progressive shift to new digital media has already occurred, and the digital realm

is dominating, like it or not. The question now, is whether they will be able to make

such substantial changes to their business dealings, before the digital market

destroys them.

Advances in digital technology, have caused the “multiplying distribution channels,

declining entry barriers for content producers” (Lewis, 2008, p1), making file sharing

software possible and piracy easy. Moreover, “continuous technological

advancements, and mounting competitive pressures” (Lewis, 2008, p1), have led to

the transformation of entertainment industries, but none more so than the music

industry. Music consumption has been revolutionised by the creation of the MP3 and

file sharing software, and the industry has been forced to face piracy head on, in the

reality of their ever plummeting profits. The Internet has challenged traditional

business structures and supplier, consumer relationships within the music industry,

rendering retail distribution models almost obsolete. Like Apple has demonstrated,

an adequate business structure, suiting the digital climate of the new Information

Age, needs to be employed in order to maintain a market share (Knopper, 2011, p1).

Moreover, in light of the successful growth of many online music stores, it has been

proven that others in the music industry can still win, in the ongoing war, waged

against Internet piracy.

WORD COUNT: 3,288

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